Walgreen Co.
has decided not to relocate its corporate headquarters, people familiar with the matter said, amid complications in pulling off the transaction and a backdrop of heavy political pressure from Washington to end the controversial tax-avoidance move.

The drugstore chain came under pressure from a group of investors to consider a so-called inversion as part a deal to acquire the 55% of Switzerland-based drugstore operator Alliance Boots GmbH that it didn't already own. Walgreen is expected to announce Wednesday that it will exercise its option to buy the rest of Alliance Boots next year, but also will say it is keeping its headquarters in the U.S., the people said.

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The decision to keep the chain, which has 8,200 drugstores across the U.S. and nearly all of its profit earned on American soil, based in the U.S. may calm fears that shoppers would shun Walgreen stores as a form of protest. But it could anger some shareholders who had bet that Walgreen would seek to domicile in a tax-friendly locale like Switzerland.

Walgreen originally agreed to buy 45% of Alliance Boots in 2012 for about $6.7 billion, a deal that would give the company more global exposure and the two pharmacy chains greater heft when negotiating with drug suppliers. The second part of the deal was scheduled to occur early next year.